Recharging the rally
Stocks surge, as the March market run shows its legs.
The FixersNEW YORK (CNNMoney.com) -- Stocks surged Thursday, extending the rally that has propelled the major gauges up more than 20% each in just 2-1/2 weeks.
The Dow Jones industrial average (INDU) rose 175 points, or 2.3%, and the S&P 500 (SPX) index rose 18 points, or 2.3%. The Nasdaq composite (COMP) rose 58 points, or 3.8%, and closed in positive territory for the year.
The advance was broad based, with 28 out of 30 Dow issues climbing, led by General Motors (GM, Fortune 500), Alcoa (AA, Fortune 500), Hewlett-Packard (HPQ, Fortune 500), Microsoft (MSFT, Fortune 500), Intel (INTC, Fortune 500) and American Express (AXP, Fortune 500). But other big bank stocks slipped, with the influential financial sector flat on the session.
Best Buy (BBY, Fortune 500)'s better-than-expected earnings report fired up the retail sector.
Since the Dow and S&P 500 fell to 12-year lows on March 9, stocks have been on a tear. As of Thursday's close, the Dow is up 21%, the S&P 500 is up 23% and the Nasdaq is up 25%. But only the Nasdaq is up slightly year-to-date and the Dow and S&P 500 remain below early-February levels.
"The million dollar question is 'Is this real?,'" Kenny Landgraf, principal and founder at Kenjol Capital Management said. "From a technical standpoint, there are buyers coming into the market, so you have the army behind you, which is good."
He said that the recent spate of less- terrible-than-expected economic news was also hopeful, including Wednesday's better-than-expected readings on durable goods orders and new home sales. Investors have also reacted well to the latest government attempts to stabilize the banks.
"At some point, people decide it's time to put money back to work," he said. "But there's still a sense of not wanting to get tricked again after last fall."
Stocks supposedly hit bottom twice before in the current bear market, in both November and October. But Wall Street ended up giving back all the gains accrued following those bottoms and moving even lower.
"This is a bear market rally, not something more," said Drew Kanaly, chairman and CEO at Kanaly Trust. "In bear markets, 25% or 50% rallies are not unheard of and investors should use this as an opportunity to raise more cash."
He said that the recent economic news has only been better because year-ago results were "pathetic."
Friday's main news item is the February reading on income and spending. Personal income is expected to have fallen 0.1% after rising 0.4% in the previous month, according to economists surveyed by Briefing.com. Personal spending is expected to have risen 0.3% after climbing 0.6% in the previous month.
The revised reading on consumer sentiment from the University of Michigan is also due.
Washington: Treasury Secretary Tim Geithner outlined a massive overhaul of the regulatory system in the wake of the financial meltdown of the last 18 months. Speaking before the House Financial Services Committee, he said the changes are needed to repair a system that has "proved too unstable and fragile."
Changes include having a single regulator oversee the biggest financial firms and requiring large hedge funds to register with the Securities and Exchange Commission. Any such changes need Congressional approval. (Full story)
Earlier in the week Geithner and Federal Reserve Chairman Ben Bernanke made the case for broader powers to regulate non-bank financial institutions like insurer AIG (AIG, Fortune 500).
On Monday, Treasury introduced its plan to purge bank balance sheets of up to $1 trillion in bad assets that are limiting lending and prolonging the recession.
Company news: Best Buy (BBY, Fortune 500) reported a 23% drop in fiscal fourth-quarter earnings versus a year earlier. Excluding charges, the retailer earned $1.61 per share, versus economists' forecasts for $1.40 per share.
The company also forecast full-year earnings in a range of $2.50 to $2.90 per share versus estimates for a gain of $2.45 per share. Shares rallied 13%.
General Motors (GM, Fortune 500) said that 7,500 union workers, or 12% of its U.S. factory workforce, took its latest buyout offer as it continues to cut costs in an effort to gain additional federal aid money. GM gained 14%.
Google (GOOG, Fortune 500) said it was cutting just under 200 positions worldwide, with the cuts coming in its sales and marketing divisions. It is only the Internet behemoth's second round of layoffs in its history.
Market breadth was positive. On the New York Stock Exchange, winners beat losers almost four to one on volume of 1.81 billion shares. On the Nasdaq, advancers topped decliners by over four to one on volume of 2.65 billion shares.
Economy: The number of Americans filing new claims for unemployment rose to 652,000 from a revised 644,000 the prior week. Economists surveyed by Briefing.com thought sales would have risen to 650,000.
Continuing claims, a measure of people who have been receiving unemployment for a week or more, rose to an all-time high of 5.56 million.
Fourth-quarter GDP shrank at an annual rate of 6.3% in the fourth quarter of last year, versus an earlier reading of 6.2%. The decline was a 26-year low. Economists thought GDP would shrink by a 6.6% annual rate.
Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 2.73% from 2.79% Wednesday. Treasury prices and yields move in opposite directions.
Both stock and bond investors were also reacting positively to the conclusion of a 7-year Treasury note auction, which was seen as showing good demand. This was a relief after a 5-year note auction Wednesday was seen as being a bit on the weak side.
Lending rates were unchanged. The 3-month Libor rate held steady at 1.23%, where it stood Wednesday, while the overnight Libor rate held steady at 0.29%, according to Bloomberg.com. Libor is a bank-to-bank lending rate.
Other markets: In global trading, Asian and European markets both ended higher.
In currency trading, the dollar gained against the euro and the yen.
U.S. light crude oil for May delivery rose $1.57 to settle at $54.34 a barrel.
COMEX gold for May delivery fell $1.70 to settle at $940.90 an ounce. 
